2021 Emerging Trends in Public Programs

Overview: Medicaid and the health care system

In a typical year, one of the most significant factors impacting trends in Medicaid and the health care system would be the outcome of the Presidential, Congressional and State elections. However, this past year was not a typical year, as the factor that has most significantly impacted the Medicaid program and the health care system overall has been the COVID-19 pandemic, which shifted trends in both enrollment and spending.

Going into 2020, trends such as slightly decreasing or flat enrollment in Medicaid, increasing total spending in health care overall, and Medicaid spending growth rate that was slowing were anticipated to continue. In 2019, health care spending in the U.S. increased 4.6% to $3.8T— a rate of growth similar to 2018.¹ Medicaid’s share was up from just under $600B in 2018 to $613.5B in 2019, or 16% of total spending.² A 2020 report from the Office of the Actuary at CMS projected that national health expenditures would grow on average 5.4% annually through 2028 (note that this report did not include COVID-19 pandemic impacts). Health expenditures would account for almost 20% (up from almost 18% in 2019) of Gross Domestic Product (GDP), a measure of our overall economic vitality and growth.³ Medicaid was specifically projected to increase at an annual rate of 5.5%.

In the second quarter of last year, however, health care spending decreased by almost 10%. Even with a rebound in the summer and fall, overall spending on health care in 2020 was down about 2%.⁴ This pendulum swing in spending was driven in large part by utilization shifts in hospital care. A key driver in total health care spending, hospitals saw dramatic decreases in both inpatient and outpatient volume.⁵ Despite depressed hospital care and service utilization within Medicaid programs, Medicaid spending dramatically increased in 2020 and projections are for continued growth as total enrollment continues to rise.

According to the Kaiser Family Foundation (KFF), total annual federal Medicaid spending grew by 12% in fiscal year (FY) 2020 to a total of $458B.⁶ Together federal and state spending jumped by 6.3% in FY 20 and is expected to increase by 8.4% in FY 21.⁷ This is particularly significant given that the spending growth rate in Medicaid was previously slowing due to enrollment declines. State Medicaid directors have indicated that they anticipate pressures on Medicaid spending to continue into FY 21 and even FY 22, due to enrollment increases and continued spending on long-term services and supports and provider rate changes.⁸

Based on the latest figures, Medicaid enrollment is up to ~81M from just under 71M at the start of 2020.⁹ Through March 2020, total Medicaid enrollment was declining slightly. However, enrollment numbers changed course due in large part to the Maintenance of Eligibility (MOE) requirement associated with receipt of the Federal Medical Assistance Percentage (FMAP) increase authorized by Congress. State Medicaid directors have reported that they believe Medicaid enrollment will jump by 8.2% in FY 21 due to the MOE requirement.¹⁰

Even when states begin to officially take action on redeterminations when the MOE requirement ends (anticipated in early 2022) there are some indications that few enrollees overall will have an income or other eligibility change that would cause them to be disenrolled from Medicaid.¹¹ Populations most sensitive to the changes in economic conditions due to the PHE – children, parents, expansion adults - have seen their enrollment figures increase faster than older adults or people with disabilities, which prior to the pandemic were the primary populations driving increases in Medicaid enrollment. However, given that few states have begun the process of addressing changes in circumstances or overdue renewals in advance of the end to the MOE requirement, concrete data is lacking about where Medicaid enrollment figures will be once the PHE ends. If enrollment numbers stay at their current inflated level but with no additional funding from the enhanced FMAP, states will likely experience cost pressures in Medicaid. With over 75% of the Medicaid population enrolled in Medicaid Managed Care Organizations (MCOs) and over half of the Medicaid spending flowing through managed care programs, the budget pressures will likely result in rate pressure for MCOs and/or state-driven changes to benefit design.¹²

The Medicaid system has been taxed in ways unanticipated going into 2020. The predicted rising health care costs related to the aging of the population and the introduction of higher-acuity enrollees were driving many of the trends in Medicaid at the start of the year. These trends drove the decisions states were making and informed how managed care organizations responded to meet the needs of their state partners and members. Those same cost pressures exist today but have been exacerbated and added to by the pandemic. And though identified as a secondary factor driving current trends, the outcomes of the 2020 November elections will also impact how states emerge from the current PHE and the direction of Medicaid policy and program design moving forward. Medicaid will continue to be relied upon as a critical social safety net for millions of Americans.

Macro Trend: Reforming the delivery of health care

At its core, delivery system reform encourages new ways to deliver and pay for care to make health care more effective and efficient. Value-based payment (VBP), value-based care, and alternative payment models (APMs) all fall within the broad category of delivery system reforms, and each has the potential to transform how Medicaid provides care.

Trend 1: Alternative Payment Models and Value-Based Purchasing

More and more, Medicaid Managed Care Organizations are being encouraged or are required to participate in and support delivery system and payment reforms, including alternative payment models and value-based purchasing. This change will help address health disparities and build health equity, but it comes with new challenges — especially in light of COVID-19.

Trend 2: Telehealth

The public health emergency significantly accelerated policy changes to encourage telehealth adoption. From balancing access and cost to advancing health equity and building local capacity, these changes will also introduce new benefits and barriers to receiving care.

To learn more about the Reforming the Delivery of Health Care Macro Trend, read more here or download the full Emerging Trends report. 

Macro Trend: Serving the whole person

To serve the whole person, federal and state policymakers are advancing policy and program design initiatives focused on access, care coverage and health equity. Since the COVID-19 pandemic highlighted the impact of health disparities on health outcomes, this shift will encourage initiatives that focus on access to care, care coverage and supporting non-clinical services.

Trend 3: Medicaid expansion

Currently, 38 states plus Washington, DC have adopted Medicaid Expansion — and several others are pursuing the opportunity to expand Medicaid in the next few years. There is a trend in some states that ties Expansion coverage to meeting specific community engagement requirements. This trend has new implications for many interested states, since it is anticipated that the underlying authority for community engagement requirements in Medicaid will be withdrawn.

Trend 4: Addressing the Social Drivers of Health

Social, economic and environmental factors are the primary drivers for health outcomes, care costs and care quality. COVID-19 exacerbated the existing negative impacts of all social drivers of health (SDOH) domains, with an increased impact on housing, nutrition and employment. This has spurred states to form new partnerships to help implement, expand or reform programs and initiatives, and has prompted the federal government to expand certain benefits for underserved populations.

Trend 5: Health disparities and inequities

Compared with commercial and employer-based insurances, Medicaid covers a high proportion of underserved groups. Because Medicaid beneficiaries are more likely to be impacted by health disparities, states are increasingly using Medicaid managed care procurements and contractual requirements to address these disparities and dismantle structural racism to ultimately improve health outcomes and lower care costs.

To learn more about the Serving the Whole Person Macro Trend, read more here or download the full Emerging Trends report. 

COVID-19 long-term impacts to health care delivery

The public health emergency will have long-term impacts on how care is delivered, how care quality is defined and the future of public health funding. It’s also anticipated that some of the flexibilities allowed during COVID-19 will be adopted on a more permanent basis. These long-term impacts on the Medicaid program will present new challenges, but will also introduce new benefits for the individuals and communities Medicaid serves.

To learn more about the Long-Term Impacts to Health Care Delivery from COVID-19, read more here or download the full addendum. 

Conclusion

2021 will continue to be dominated by the COVID-19 pandemic. The full impact on individuals, the U.S. economy, and the broader health care system are yet unknown, but many of the ‘temporary’ actions taken in response to the PHE appear to have the potential to become long-term trends.

The current landscape in which this report is written makes clear that access to health care, and more specifically, the coverage provided by the Medicaid program, is critical for millions of Americans and has served as a lifeline for many over the past year. Given the prominent role managed care organizations play in the management of Medicaid, there exists a unique opportunity to showcase the value they bring to the members they serve, the providers and organizations they work with, and the states they partner with as the health care system collectively emerges from the pandemic stronger, wiser and more focused than ever on ensuring our most vulnerable have coverage for, and access to, the critical health care, social and behavioral services that will most effectively address their needs.